Budget 2024: Impact on India’s Medical Devices Industry

The Union Budget 2024 has brought forth several significant measures that are expected to impact the medical devices industry in India. The key areas of focus include boosting economic growth and healthcare, introducing reforms in the healthcare sector, and implementing the Production Linked Incentive (PLI) scheme. However, the industry also faces numerous challenges that need to be addressed for robust growth.

The budget has taken steps to propel economic growth and support entrepreneurs by reducing duty on medical equipment imports and introducing credit guarantee schemes for MSMEs. It also proposes customs duty changes to boost domestic manufacturing, reduce disputes, and promote local value addition. These measures are expected to boost employment, enhance skill development, and support the growth of MSMEs in the medical devices sector.

Additionally, the budget introduces reforms to reduce costs of cancer treatment, diagnostic equipment, and promote telemedicine, seafood nutrition, and environmental health. Changes in the Basic custom Duty (BCD) on X-ray tubes and flat panel detectors used in medical X-ray machines under the Phased Manufacturing Programme are expected to increase domestic value addition for establishment of Xray machine manufacturing ecosystem in the country. There is also a reduction in custom duty on the use of polyethylene in orthopaedic implants and use special grade steel in use of implants, this is expected to bring down the cost of implants manufactured in India.
The budget’s emphasis on women-led development is reflected in the measures introduced to support entrepreneurs in the medical devices industry. The credit guarantee schemes for MSMEs are expected to empower women entrepreneurs in this sector.

The PLI scheme is another very important initiative that primarily focuses on promoting domestic manufacturing and facilitating growth & innovation. It encourages foreign manufacturers to set up plants in India by providing financial incentives across various segments such as cardio-respiratory devices, orthopedic, urology, cancer care, imaging, radiology, and radiotherapy, among others. The government has approved an investment worth Rs. 6,000 Crore under the PLI scheme for the pharma and medical devices sectors.

Despite these positive measures, the Indian medical devices industry faces numerous challenges. India imports over 70% of medical devices from other countries. The Indian regulatory environment is complex and ever-changing. The industry also faces supply chain hurdles due to the poor condition of roads in India. There is always a risk of damaging expensive healthcare products. Quality control is another challenge as medical devices are life-critical systems.

Direct tax announcements

The Finance Minister has announced a comprehensive review that the prevailing Income-tax Act in next 6 months for simplification, reduced tax litigation, bring more certainty.

While there are not specific direct tax proposals for the medical devices industry, the abolition of angel tax can be looked as positive measure for the industry growth as it would enable the investors to avoid any litigation while infusing more funds into the closely held companies. Further, abolition of equitization levy of 2% and reduction of tax rate on the income of foreign companies is a welcome move for the foreign companies to surge their business with Indian enitites, thereby enabling the Indian markets to import hard reaching technical knowledge and innovative goods.

Another significant amendment is the abolition of buy back tax and shifting the incidence on the investors, which may not be an attractive option for Indian investors, but the foreign investors may be benefitted by availing tax treaty benefits, as applicable.

Also, rationalization of TDS regulations would help the companies in better working capital management. The decriminalization of TDS provisions to provide exemption from prosecution where TDS has been deposited before due date of filing TDS return for the quarter, can also be seen to provide relief to the start-ups where there is less stability in working capital management.

In conclusion, while the Union Budget 2024 has introduced several positive measures for the medical devices industry, there are still several challenges that need to be addressed to ensure the industry’s robust growth. The budget’s focus on inclusive growth, women-led development, and digital public infrastructure provides a promising direction for the future of India’s medical devices industry.